The German paradox: gas depots at risk of closure because they’re unprofitable. And the fear of the cold?

At the very start of the heating season, while everyone is anxiously watching bills and the stability of supplies, the German energy giant Uniper , which is also nationalized and therefore state-owned, has asked to close its third-largest gas storage facility in Germany, Breitbrunn in Bavaria. The reason? Simple and brutal: " The revenues are not enough to cover the costs ."

A strategic service, vital to national and European security, is at risk of being dismantled because it doesn't generate enough profit. A puzzle that reveals all the fragilities of an energy market that has lost its bearings.

The gas market has broken down: how did we get here?

To understand the absurdity of the situation, we need to take a step back. Until a few years ago , the gas storage business was a well-oiled and highly profitable machine. The model was simple:

• In the summer: Russian gas, which arrived steadily and cheaply via pipeline, was purchased and pumped into underground storage facilities.
• In winter: when demand and prices skyrocketed, the accumulated gas was resold, making large profits thanks to the price difference between the two seasons (the so-called "summer-winter spread").

With the disruption of Russian supplies, this model has shattered. Today, gas arrives largely by ship in the form of LNG (Liquefied Natural Gas), with a "just-in-time" logic that has flattened, if not reversed, seasonal price differences. Storing gas has become a cost, no longer an investment, even though LNG is still more expensive than the old Russian pipeline gas.

The State's botched intervention

Faced with the emergency, the German government created a dedicated agency, "Trading Hub Europe" (THE), tasked with purchasing gas on the global market at any price to guarantee supplies, using taxpayers' money. This has generated two perverse effects:

1. Costs to citizens: To cover THE's insane spending, a "gas storage tax" was introduced, costing German consumers approximately six billion euros over the past three years. A significant blow to gas bills, similar to what we experienced, and still experience, in Italy.
2. Moral Hazard: Knowing that, if necessary, the state would intervene at exorbitant prices, market operators stopped worrying about filling their stocks, effectively speculating against the public interest.

The result is clear for all to see: at the beginning of October, German storage facilities are only 77% full, compared to a normal level for the period, which should exceed 90%. A sufficient level for a mild winter, but disastrous in the event of a prolonged cold snap like the one in 2010.

The situation is also clearly illustrated by this Bloomberg chart, which shows the trend of gas reserves in European storage facilities.

Basically, the filling hasn't happened yet, or it's only just started.

An irreversible risk and the future of hydrogen (maybe)

The issue isn't just winter safety. Shutting down a storage facility isn't like turning off a light switch. These facilities, whether salt caverns or depleted porous reservoirs, require constant internal pressure (the so-called "buffer gas") to prevent collapse or filling with water. A shutdown would, in effect, be permanent.

This would not only jeopardize Germany's energy security (and Europe's, which depends on those storage facilities), but it would also derail plans for the hydrogen transition. Hydrogen, having a lower energy density than methane, would require double the current storage capacity. The famous hydrogen economy, a sort of German and European energy fetish, would collapse.

The solution? Probably looking at models like the French one, where storage is mandatory for operators and the state intervenes with risk- and profit-sharing mechanisms ("contracts for difference"). Or a system of co-participation in the management of the storage facility, or involving other countries, such as the Czech Republic or Poland, that would need that gas. Or finding more stable suppliers and ending the absolutely anti-Russian policy.

In any case, one thing is clear: energy security can no longer be a random byproduct of the market, which doesn't always price strategic risks correctly. Unless Berlin has its own secret gas reserve, it would be wiser not to shut down a unique European infrastructure.

Questions & Answers for the Reader

1) Why would a state-owned company like Uniper act against the public interest by threatening to close a strategic depot?

Even though it was nationalized to save it from bankruptcy, Uniper must operate according to budgetary principles. The storage business model, based on the price differential between summer and winter gas, is no longer profitable following the cutoff of low-cost Russian supplies. Keeping the facility operational generates losses that the company no longer wants to sustain. This highlights a conflict between the public nature of ownership and the obligation to operate as a profit-driven private company, a paradox typical of state-owned companies in a liberalized market.

2) What is the concrete risk for Italy and Europe if Germany reduces its storage capacity?

Germany has the largest gas storage capacity in the European Union and is a crucial distribution hub across the continent. Reduced capacity would mean a smaller "safety reserve" for everyone, including Italy. During cold winter peaks, when demand is highest, prices on the European market could experience even more violent surges due to the scarcity of immediately available supply. This would increase our collective vulnerability to geopolitical shocks or exceptionally cold winters, making the entire system more unstable.

3) What are “Contracts for Difference” (CFDs) and how could they solve the problem?

Contracts for Difference (CFDs) are a financial agreement between an operator and the government. In this case, the government would guarantee the storage operator a minimum price for its service, covering any losses if market revenues were too low. In return, if the operator generated profits above a certain threshold, it would share them with the government. In practice, it's a way to socialize risks and rewards, ensuring the economic sustainability of an essential service without being solely dependent on volatile market conditions.

The article "The German Paradox": Gas Depots at Risk of Closure Because They're Unprofitable. And What About the Fear of the Cold?" comes from Scenari Economici .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/il-paradosso-tedesco-depositi-di-gas-a-rischio-chiusura-perche-non-reddizi-e-il-terrore-del-freddo/ on Fri, 03 Oct 2025 09:00:31 +0000.